The shadow chancellor, Michael Portillo, last night launched a pre-emptive strike on Gordon Brown's budget by warning that any tax cuts offered today would have to be reversed, if Labour won the forthcoming election, to pay for the chancellor's "unsustainable" spending plans.

Mr Portillo said Mr Brown's £68bn increase in public expenditure over the next three years would "outstrip what the nation can afford", adding that the chancellor could only cut taxes today because he had over-taxed since 1997.

City analysts said they expected Mr Brown to inject an extra £4bn spending power into the economy but believe that the budget will not alarm the Bank of England, which begins its two-day meeting to decide on interest rates today.

With tax receipts higher than expected and spending undershooting, Mr Brown's budget surplus for this year is set to be at least £6bn higher than the £10bn he forecast four months ago.

But Mr Portillo argued that Labour's spending increases, at 3.4% of GNP, would outstrip underlying trend growth at around 2.25%. "If Labour were re-elected, taxes would have to go up again. Where would the money come from, who would suffer?" he asked.

"The choice could not be clearer: a Labour party which has taxed more and failed to deliver or a Conservative party which will reduce taxes for hard-working families, pensioners and businesses, reform public services to deliver better value for money."

Mr Brown faced the opposite complaint from the Liberal Democrats: that he is putting tax cuts ahead of his duty to hospitals, schools and pensioners. Labour leftwingers and trade unionists privately echo these concerns.

"Labour should not be cutting taxes when they have so clearly failed to sort out [these services]," said Matthew Taylor, the Liberal Democrats' treasury spokesman. "You can't get more teachers, nurses and police on the beat for free - but they are affordable."

Mr Portillo accused Mr Brown and Tony Blair of "increasing taxes relentlessly" since 1997, notably through "stealth taxes"- the one Tory propaganda charge that has stuck and damaged Labour.

Mr Brown has let it be known that he intends to concentrate on "targeted" measures aimed at Labour's priorities - working families with young children, pensioners, and savers. To shore up his tax-cutting credentials he will increase the slice of income on which tax is paid at 10p, benefiting all taxpayers.

The Liberal Democrats twisted the knife by pointing out that Mr Brown's cautious first two years means that - so far - he has spent 5.4% of GNP on health compared with 5.5% under John Major. For education, the comparable figures are 4.6% ( 5%) and for pensions 5.2% (5.4%).